The business is in a period of transition, and the two core competencies of car networking and public security informatization are gradually forming. The company released its 2019 annual report on the evening of April 28, with annual revenue of 2.693 billion yuan (YoY-24.41%) and net profit of-1.157 billion yuan (YoY-314.48%), which was lower than expected. As the company is in a period of business transition and affected by the impairment of goodwill of some subsidiaries in the past 19 years, revenue and profits have declined compared with the same period last year. At present, the company is actively completing the business transformation, focusing car networking and public security information two vertical applications, gradually forming the core competitiveness, with the business landing, is expected to return to growth in the future. The company's EPS is expected to be 0.06,0.10 and 0.18 yuan respectively from 2020 to 2022, downgrading to "overweight" rating.
Due to the impact of business transformation and goodwill impairment, the company's 19-year revenue and net profit under pressure since the completion of the acquisition of ZTE IoT in early 18, the company has shifted its strategic focus from traditional Ping an city integration business to the field of car networking and public security information. The company accelerated its transformation in 2019, resulting in a 35.34% year-on-year decline in revenue from the traditional integration business. The car networking and public security information business, affected by overseas trade frictions, the decline in domestic car sales, the lower-than-expected landing of public security projects, and other factors, made the company's total business revenue drop 24.41% compared with the same period last year. At the same time, in order to speed up the transformation, quickly form the core competitiveness, grasp the first-mover advantage of the industry, increase the cost investment, and some subsidiaries of the company carry out goodwill impairment of 1.024 billion yuan, resulting in a substantial decline in net profit.
Consolidate core competitiveness, with R & D investment reaching 554 million yuan in 19 years
The company's annual R & D investment in 2019 reached 554 million yuan, an increase of 36.48% over the same period last year, accounting for 20.56% of total operating income, an increase of 9.17% over 18 years. R & D investment focuses on 5G vehicle networking, artificial intelligence and other R & D directions, for its follow-up power vehicle networking V2X and public security information energy storage.
We believe that the investment in the current stage will help the company to achieve rapid transformation, grasp the first-mover advantages in the early stage of the development of vehicle networking V2X, and realize the transformation from traditional integrators to products and platforms.
The industry policy continues to increase, and the company grabs the highland of the intelligent network self-driving industry. On February 24, 11 ministries and commissions jointly released the official draft of "Intelligent vehicle Innovation and Development Strategy", which is expected to become the first year of the landing of the intelligent network automobile industry in 2020. Combined with the recent policies related to new infrastructure, 5G and road information infrastructure construction is expected to become a catalyst for the accelerated development of the industry. At present, the company has formed a whole industry chain layout from vehicle specification-level communication module, vehicle terminal T-BOX and OBU, roadside terminal RSU, and intelligent transportation platform. With the gradual infiltration of the intelligent network connection automobile industry, the company is expected to form a first-mover advantage and open up the growth space in the future.
The company's business is still in transition, the scale growth has not yet arrived, downgraded to "overweight" rating, we continue to be optimistic about the future development of the company, based on the continued improvement of the intelligent Internet connection industry, combined with the company to focus on expanding car networking V2X to open the growth space. However, considering that the company is still in a period of transition, the traditional integration business is further compressed, and the new business has not yet formed scale growth, the company's revenue, gross profit margin and expense assumptions are adjusted. It is estimated that the company's EPS for 20-22 years is 0.06 EPS 0.10 EPS 0.18 yuan respectively (before the adjustment 20-21 years EPS is 0.45pm 0.63 yuan respectively), downgrading to "overweight" rating.
Risk hint: overseas OBD terminal shipments are uncertain, the landing of domestic car networking products is not up to expectations, and public security information bidding may be delayed.